The US government is understood to be finalising a bailout deal for General Motors and Chrysler using money set aside to help ailing banks. An announcement could be made as early as tomorrow (December 17).
The new deal comes after the original $14bn (£9.4bn) bailout of the US car industry failed to get enough support in a vote in the Senate last Friday. The new funds will come from the $700bn (£460bn) funding pool originally set aside to keep banks from collapse.
Government officials say the money would be offered to General Motors and Chrysler to keep them from going bankrupt next year, as long as they could prove they would survive and could still compete.
Both GM and Chrysler have warned that they could run out of money next year without a cash-injection. Reports suggest GM will be offered $8bn (£5.25bn) and Chrysler $6bn (£4bn).
Ford will be able to request funds if its financial situation worsens, but will not be offered money at present. Alan Mulally, the company’s chief executive, has vowed to work for an annual salary of $1 (69p), instead of $2m ($1.4m), if the carmaker accepts aid.
In the UK, the government is expected to unveil a limited aid package for beleaguered car manufacturers this week in a bid to prevent thousands of potential job losses. A majority of manufacturers have now stopped production for Christmas, a week earlier than usual.